Shareholders are the owners of a limited company, and their involvement is central to the company’s structure and decision-making. Over time, circumstances may change, requiring the addition of new shareholders or the removal of existing ones. Both processes must follow UK company law and be properly recorded at Companies House to keep your business compliant.
Adding a New Shareholder
There are two main ways to add a new shareholder to a company:
1. Issuing New Shares
The company creates new shares and allocates them to the incoming shareholder.
This increases the total number of shares in the company, potentially reducing the percentage ownership of existing shareholders.
The board of directors usually authorises this, but the company’s articles of association may require shareholder approval.
2. Transferring Existing Shares
An existing shareholder can sell or gift their shares to another person or business.
This does not change the total number of shares in the company, but ownership is transferred.
A stock transfer form is normally required, and stamp duty may apply if the transfer value is over £1,000.
Important: After adding a shareholder, Companies House records must be updated when the next Confirmation Statement Filing is due, ensuring shareholder details are accurate and up to date.
Removing a Shareholder
A shareholder can leave a company either voluntarily or due to circumstances such as selling shares, resignation, or by mutual agreement.
Common Methods:
Selling Shares: The shareholder sells their shares to another shareholder or an external buyer.
Share Buyback: The company repurchases the shares from the shareholder (specific rules and approvals apply).
Transfer by Agreement: A shareholder may gift or transfer shares to another individual or entity.
The method chosen will depend on the articles of association and any shareholders’ agreements in place.
Updating Company Records
Whenever shares are added, transferred, or removed, the following steps are required:
Update the company’s register of members (a legal requirement).
Issue new share certificates to shareholders (if relevant).
Complete and keep stock transfer forms.
Report the changes in your next Confirmation Statement Filing Services to Companies House.
Final Thoughts
Adding or removing shareholders in a limited company must be handled carefully to ensure compliance with UK company law and Companies House requirements. Whether through issuing new shares, transferring existing ones, or completing a buyback, it’s essential to update records promptly and correctly. Keeping your company registers and filings accurate will help you avoid legal complications and maintain transparency.